9911796707
TMI Blog2023 (7) TMI 464X X X X Extracts X X X X X X X X Extracts X X X X ..... sactions undertaken by enterprises dealing in real estate as sellers or developers. It encompasses the whole gamut of determination of project costs, project revenues and determination of closing work-in-progress (closing stock) at the end of the reporting period. Therefore, we find that there is no basis to hold that the scope of limited scrutiny is restricted to determination of whether the assessee has followed the percentage completion method or not rather the scope of the limited scrutiny is to determine whether the assessee has followed the percentage completion method and secondly, how the said method has been actually followed while accounting for the real estate transactions undertaken by the assessee during the financial year r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the provisions of S. 250(6) of the Income Tax Act, 1961. 2. That on law, facts and circumstances of the case, the Worthy CIT(A) has erred in confirming the action Ld. AO wherein he had erred in making the impugned additions beyond the issues for which the case was selected under Limited Scrutiny guidelines and therefore the impugned additions deserves to be deleted. 3. That on law, facts and circumstances of the case, the Worthy CIT(A) has erred in confirming the action Ld. AO wherein he had erred in making addition of Rs. 2,12,45,569/- by enhancing the declared closing stock value by said amount which is 51% of the land cost even when the value of closing stock already declared by the appellant was as per accepted method of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ethod for valuation of closing stock. It was submitted that the AO never disputed the method of valuation of stock implied by the assessee. Therefore, once this verification was done, the scope of limited scrutiny was completed and no further proceedings were warranted. However, the AO has gone beyond the scope of limited scrutiny and proceeded to revalue the stock without converting limited scrutiny into complete scrutiny. As per the Board s Instruction No.20/2015 dated 29.12.2015, it was submitted that in the instant case, the case was selected under Limited Scrutiny Guidelines and the AO never sought permission from the Competent authority for conversion of limited scrutiny to complete scrutiny and therefore, in terms of Board Instructio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has reworked the revenue recognition as per the Percentage Completion Method as per the Guidance Note issued by the ICAI whereby the closing stocks works out to Rs. 4,94,01,649/- and the sales works out to Rs. 5,98,62,570/- and after taking into consideration the opening stock of Rs. 20,41,000/- and purchases of Rs. 9,64,19,577/- it will show gross profit of Rs. 1,08,03,643/-. It was, accordingly, submitted that basis the Percentage Completion Method as per the Guidance Note issued by ICAI, there would be change in the value of the closing stock, in addition there would be change in the value of the sales which needs to be recognized in the assessee's trading account and it was, accordingly, submitted that the revised worki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e can't be quantified. He had also held that apportioning different rates of construction to different categories of flats was not logical and this-tactic did not lead to calculation of stock on a reasonable basis. The submission also reveal that the assessee claims that since closing stock has been tweaked that should be matched by a corresponding updation of sales/ turnover. The logic if applied would lead to a further enhancement of the profits for the year. Without prejudice it is also the case that revenue recognition under percentage completion method is based on a proportionate basis of the cost and not closing stock of land. Since the costs have not been tinkered with this is not a case for proportionate increase in revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... real estate transactions undertaken by the assessee during the financial year relevant to the impugned assessment year. Therefore, the contentions advanced by the ld AR cannot be acceded to and are hereby dismissed. Hence, ground no. 2 is dismissed. 8. Regarding ground no. 3, the ld AR has submitted that basis the Percentage Completion Method as per the Guidance Note issued by ICAI, there would be change in the value of the closing stock, in addition there would be change in the value of the sales which needs to be recognized in the assessee's trading account and that the revised working may be considered and the matter may be set aside to the file of the AO to examine and verify the same. The matter is accordingly set-aside to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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